Advice for Young Graduates with Debt Problems
Advice for Young Graduates with Debt Problems
A study in 2009 revealed that only 2% of undergraduates had no credit history (source:www.creditcards.com). This means 98 out of every 100 students leaving college with a graduate degree also walk out with loads of debt. Figures suggest that while the salary for a fresh graduate is $30,000 on average, theaverage college student carries more than $20,000 in debt at the time of graduation! Imagine $20K in debt in your twenties! Two out of every three dollars a youngster earns will be spent on repayment. More shocking is the fact that most of these 98% do not seek any debt problem advice, but rather ignore their debt. They continue accumulating loans, paying interest and spending more than a simple budget limit would allow. While in their care-free young world, they are unable to see that every penny they pay in interest could be avoided and used for other things, like investments, savings or even shopping and leisure!
Basic Advice for Debt Problems - Watch out for These Risk Factors
Ever wondered how your situation could possibly be any worse? Have a look at some important causes behind debt mounting higher:
Financial emergency - A sudden emergency could rob you of hundreds of dollars. It may be related to medical expenditures, the loss of a job or losing money to gambling. It is sudden and weighs heavily on your finances.
Loss of job - Job loss has been a nightmare come true for millions who were suddenly rendered unemployed during the 2009 economic debacle. In such a case, if there is no secondary source of income or enough savings, debt can pile up to insurmountable heights. Good advice for debt problems caused by job loss would be to always have a back-up plan in the form of enough savings and/or alternative income plans.
Mismanagement of finances - Whether you have a little or a lot of money, it seems to slip out of your hands very easily if not managed properly. Using plastic money without caution, not preparing a budget, spending extravagantly and late payments are all examples of financial mismanagement.
Little or no savings - While spending our earnings, we forget the childhood story of the grasshopper that did not save for the harsh winters. A young heart is easily lured by fun and frolic and discount tags, and savings are put on the back burner. Without the cushion of savings, any sudden financial demand will only lead to increased debt.
What Next?
This all leads to an alarming debt situation in which nearly one in five 18- to 24-year-olds is in "debt hardship" (Source: Demos.org, "The Economic State of Young America," May 2008). Can anything be done? If you are one of the lucky ones falling in the 2% of debt free graduates, you may need advice on debt problems to stay debt free for the long term. If you are facing tough times due to debt, however, here are some important tips to guide you on what to do next:
Budget: The single most important and simplest technique for repaying your debt is budgeting. A sensible budget allots money to priorities, like repaying bills and loans, and curtails futile expenses. Sit down and make a note of everything that has to be paid each month and how much disposable money remains. With a little discipline, you can make it a point to spend within the limits determined by your budget. For first timers, here'show to write out a budget.
Know where you spend: Spending with credit cards? Unable to make out how you your cash vanishes within so quickly? Take control of your money. Good debt problem advice would suggest keeping a tab on your spending. Credit card usage history is easily available. Cash expenditures can be recorded in a notebook. At the end of the month, take a look at your spending patterns. You can surely determine your negative spending habits eliminate them to be debt free.
Pay more than the minimum: Credit card dues will ultimately be paid off some day, somehow. This is a widespread myth. By just paying the minimum each month, you end up paying more and more interest instead of what you actually spent. So try hard to pay off all your monthly bills regularly.
Credit cards are not a necessity: Great advice on debt problems is to stay away from or minimize credit card usage. Credit cards give you a sense of false purchasing power that you do not actually have. Using plastic money for convenience is like taking a loan every time you spend. Remember - the credit card company is not going to pay it for you; eventually you will have to shell out what you owe from your own bank balance.
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